Deutsche Bank economist says Fed Funds Rate is 100 basis points too low

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Matthew Luzzetti argues the Federal Reserve has cut too aggressively, creating a gap between actual policy and what standard rules would recommend.

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Deutsche Bank’s Chief US Economist Matthew Luzzetti has a message for the Federal Reserve: you’ve overshot. According to Luzzetti, the current federal funds rate sits roughly 100 basis points below where standard monetary policy frameworks, like the Taylor rule, suggest it should be.

The Federal Reserve cut its target range by 25 basis points on December 10, 2025, bringing it down to 3.5%-3.75%. That move was the latest in a series of quarter-point reductions that have defined the Fed’s easing trajectory over recent months.